In a pro-choice world, to choose an appropriate investment strategy, we need also to choose the fund in which that strategy will reside, and perhaps even the manager to pursue it on our behalf. We need to look at things like risk tolerance, both in an objective sense (based on facts such as age, current net worth etc) and a subjective sense (which is attitudinal in nature). Each potential outcome needs to be stress-tested in a variety of environments. We need to undertake market-wide research to ensure our choice is cognisant of all opportunities…Again, the list goes on. And again, all this must take account of amounts to be invested. The process is yet again interactive!

Now for the sole purpose test. The test requires that the fund is maintained solely for at least one of the prescribed “core purposes”. In addition, if it meets this requirement, it may also be maintained solely for it and at least one of the prescribed “ancillary purposes”. The lists of prescribed core and ancillary purposes are quite broad. Core purposes include benefits for members or their dependants on retirement, death and specified age-attained benefits. Ancillary purposes include termination, ill health and post-retirement benefits, and countenance both members and their dependants.

APRA’s 2001 paper on the sole purpose test (as far as I know this still stands as their view) also acknowledges that the nature of emerging “outcomes” doesn’t “conclusively” determine whether they are covered by the sole purpose test, but rather we should focus on the “purpose” for which the fund is “maintained”. “Provision” is also more than the payment of benefits. It takes account of “other activities” that “support” and enhance benefits “through sound investment practices”.

As APRA sees it, a fund’s governing rules, procedures and practices are the primary sources for judging whether it is maintained consistently with the sole purpose test, and the fund’s planning and corporate governance documents also illustrate the fund’s intentions. In looking at whether a service or action fits the sole purpose test, the fund should seek a “reasonable, direct and transparent connection” between it and the “core and ancillary purposes”. I maintain that genuine fiduciaries cannot assist members to make informed decisions about their superannuation without the advice service looking at their total situations. This has always been the case in my view, but it is even more so in a pro-choice environment – choice-based superannuation is compulsory after all. Not to do so runs the risk of sub-optimal outcomes for members and to adopt such a course in full knowledge of such a risk doesn’t seem to fit with the nature of fiduciary obligations.